Barclays gets a US$44 million fine over gold fix

Barclays has been fined £26 million (almost US$44m) and one of its former traders banned from working in the city for mistakes relating to the way that the gold price is fixed in London.

Almost two years after being hit by a £290m ($489m) fine for rigging the Libor (London Interbank Offered Rate) rate, Barclays is now facing the wrath of regulators again. This time the U.K. Financial Conduct Authority is making the bank pay for almost 10 years of, as the statement says, “inadequate” oversight of the way it was involved in setting the price of gold, known as the fix.

The FCA added Barclays had failed to “adequately manage conflicts of interest between itself and its customers as well as systems and controls failings, in relation to the gold fixing” between 2004 and 2013.

“A firm’s lack of controls and a trader’s disregard for a customer’s interests have allowed the financial services industry’s reputation to be sullied again,” the FCA director of enforcement and financial crime, Tracey McDermott, saidin the statement. “Traders who might be tempted to exploit their clients for a quick buck should be in no doubt – such behaviour will cost you your reputation and your livelihood.”

The regulator has also banned former Barclays trader Daniel James Plunkett and fined him £95,600 for exploiting weaknesses in the bank’s systems. The British authority said Plunkett, settled with the regulator, profited at the expense of a customer, who was later fully compensated by Barclays.

Barclays' chief executive, Antony Jenkins, who was promoted to replace Bob Diamond in the wake of the Libor rigging scandal, insisted the bank was already making changes to its culture to avoid such problems happening again.

The financial institution is the first bank to be fined over attempted manipulation of the 95-year-old London gold market daily fix.

The Fixing

The rate-setting ritual dates to 1919. Dealers in the early years met in a wood-paneled room in Rothschild’s office in the City of London and raised little Union Jacks to indicate interest. Now the fix is calculated twice a day on telephone conferences at 10:30 a.m. and 3 p.m. London time. The calls usually last 10 minutes, though they can run more than an hour.

Firms declare how many bars of gold they want to buy or sell at the current spot price, based on orders from clients and themselves. The price is increased or reduced until the buy and sell amounts are within 50 bars, or about 620 kilograms, of each other, at which point the fix is set.

Traders relay shifts in supply and demand to clients during the call and take fresh orders to buy or sell as the price changes, according to the website of London Gold Market Fixing, where the results are published. The process is unregulated and the five banks can trade gold and its derivatives throughout the call.